Thursday 28 January 2010
[Robert Key in the Chair]
Carbon Capture and Storage
[Relevant documents: Ninth Report from the Environmental Audit Committee on Carbon Capture and Storage, HC 654, Session 2007-08, and the Government response, Cm 7605, Session 2008-09.]
Motion made, and Question proposed, That the sitting be now adjourned.—(Mark Tami .)
On a point of order, Mr. Key. When we had a similar debate not very long ago, I asked the Chair if a more logical sequence for speaking would be acceptable, so that after the Chairman of the Select Committee has introduced the report, the Minister can at that stage speak to the Government’s reply, which is, obviously, the other document that is before us. It seems more logical for both the Select Committee Chairman and the Minister to present their case, as colleagues can then intervene and, with the leave of the House, the Minister can wind-up and pick up any other things. That strikes me as a better way of using our time.
I am entirely in your hands, Mr. Key. I do not mind one way or the other.
I believe that a precedent has been set in that respect, so if the Minister is content, that is how we shall proceed. After the Chairman of the Select Committee has spoken, I will ask the Minister to speak. Would the Opposition spokesman like to speak after that?
I warmly welcome you to the Chair, Mr. Key. You and I are some of the survivors of the 1983 intake but, alas, I think you have made a different decision from me about what to do at the next election. I am very happy with the order of speaking that has been proposed for this afternoon—it seems to have a logic to it. I obviously warmly welcome the Minister, my hon. Friend the Member for Wealden (Charles Hendry) who speaks for the Opposition, and the hon. Member for North Southwark and Bermondsey (Simon Hughes) who speaks for the Liberal Democrats.
I am delighted that the report has been chosen for debate. It was written quite a long time ago and was published in July 2008. For reasons I will explain, we had to wait quite a long time for a Government response, but the importance and topicality of the report is in no way diminished by the intervening 18 months. I look forward to debating it this afternoon. I hope I may be joined at some point by some members of my Committee. I do not think they are absent because they disagree with the report—it was passed unanimously and without much discussion—but I was hoping that one or two of them might be here this afternoon.
We chose to study carbon capture and storage because the world simply has a great deal of coal—an awful lot of which will get burnt. Coal happens to be one of the cheapest, but one of the most polluting ways in which to generate electricity. Having studied the climate change issue generally very closely as a Committee over the past five years, it is clear that although most of the technology that we need to decarbonise the world’s economy—certainly in terms of the built environment and transport—already exists, the one crucial technology breakthrough we must have relates to carbon capture and storage, because of all the coal.
In Britain, coal is and will remain for some time a crucial part of our energy mix—it accounts for about a third of our electricity. Internationally, the use of coal is growing quickly. As they develop their economies, countries such as China and India are using up their coal. Globally, coal fuels about 40 per cent. of electricity generation. The International Energy Association expects demand for coal to grow by more than 70 per cent. in the next 20 years. Coal generates half the electricity in the United States, more than two thirds of the electricity in India and more than three quarters of the electricity in China.
As I said, electricity produced from coal is cheap as long as the industry does not have to take account of its emissions. I contrast the attitude to coal in past generations with, for example—I realise this might be controversial and not generally agreed with—the attitude towards nuclear power. Every opponent of nuclear power always makes, with some justification, great play about the cost of dealing with nuclear waste. However, nobody opposed coal because the costs that would need to be imposed in the future as a result of those emissions would be far greater than anything arising from nuclear waste, which, at least in a physical sense, is a small problem.
Of course, the hon. Gentleman is right, and the thrust of that argument is accepted. There is obviously a difference in the type and scale of the exercise involved in decommissioning nuclear power stations and ceasing to use coal-fired power stations, which is probably why the historic argument has been in one sector, but not the other. However, his principle is, of course, good.
I accept the point about the decommissioning of the physical plant, of course.
The cost of building a coal-fired power station that captures the carbon dioxide it is producing is extremely high: it could be £1 billion for a 400 MW plant. The cost of transporting and storing carbon dioxide that has been captured is additional to those building costs. So electricity generated by plants with carbon capture and storage is, at least, currently much more expensive than the alternatives.
The large combustion plant directive was introduced to reduce sulphur dioxide and nitrogen oxide emissions, which will lead to the closure of about a third of Britain’s coal-fired power stations. Any new plants will have to be fitted with scrubbers to remove those problems. If coal-fired power stations are replaced even with gas-fired generation, as happened in the previous dash for gas, it will do little or nothing to meet our longer-term targets for cutting greenhouse gas emissions. Of course, there is a short-term gain, because gas produces less than half the emissions of coal-fired electric generation. That will therefore help to meet short-term targets.
A further big switch to gas away from coal locks Britain into an emissions pathway that will ensure that eventually we fail to meet our longer-term targets. The crucial thing in relation to that is that decisions about what sort of new generating capacity we build in the coming decade will determine our emissions 20, 30 or perhaps even 40 years from now. If the carbon price rises sharply, as it may well do, or if emissions performance standards are adopted internationally, as they may well be, choosing the wrong technology now will cost us dear at a later date.
Carbon capture and storage has become an increasingly attractive policy option. It is clear that the first countries and companies to make it financially viable will have a huge first-mover competitive advantage. When we wrote our report, there was an active debate about the future of the Kingsnorth power station, and about plans for at least three other power stations that were thought to be in the pipeline. At that time, the cornerstone of the Government’s policy on carbon capture and storage was a competition for a post-combustion demonstration plant at the 50 to 100 MW scale by 2014, to be scaled up to 300 to 400 MW as soon as possible thereafter.
Up to that point, I regret to say that progress on carbon capture and storage had been appallingly slow. The 2003 White Paper “Our Energy Future—Creating a Low Carbon Economy”, which was published when I was shadow Secretary of State for Trade and Industry, promised what was called an urgent, detailed, implementation plan, and that a study to inform decisions would reach its conclusions within six months. Three years later, when my Committee considered carbon capture and storage as part of our report entitled “Keeping the Lights On: Nuclear, Renewables and Climate Change”, we concluded that a plethora of reports gave an impression of activity, but that nothing had actually happened. A situation we justifiably described at the time as “scandalous”. By 2007, the Committee reported in its annual pre-examination of the pre-Budget report that there was still slow progress on the CCS demonstration project and no progress on devising a financial framework.
Our most recent report expressed our deep frustration with the
“lack of progress on CSS. “
“The lack of a clearer signal from Government…has slowed the development of CCS.”
We acknowledged that some progress had been made, notably around the regulatory regime for the storage of carbon dioxide, but we called for an end to the indecision that seems to characterise the Government’s approach. We pointed out not only that the indecision had been environmentally damaging, but that it was squandering any chance that Britain had to build a commercially valuable competitive advantage.
The Government argued that it was necessary to restrict the competition to focus attention on the technology that was most deserving of development and that would be easiest to retrofit. We supported their decision to focus on post-combustion technology but called for the demonstration programme to be extended. The Government told us that there was significant uncertainty on the costs, technical requirements and risks associated with CCS.
Our report concluded that the resurgence of interest in coal was failing to take account of the damaging environmental impact that would arise from running those power stations unabated, or unabated on most of their output, until CCS was proven. We said that opening the door to a new era of coal-fired generation was potentially very damaging, both environmentally and economically.
We also warned against abusing the arguments about energy mix. Investment in coal, even with the promise of CCS, must be the last resort. The Committee does not accept the Government’s claim that new coal-fired generation has no impact on overall emissions because new coal-fired power stations would have to operate with the EU emissions trading scheme cap. We have debated that point at some length. In theory, that sounds all right on one level, but as we have argued in other reports, the Government should not rely on the EU ETS in that way because the emissions from a coal-fired power station do not disappear and have to be accounted for somewhere. It goes right against the intention and spirit of the EU emissions trading system, which was designed to reduce emissions, for the Government to use it as a cover to justify continuing to encourage, or at least allow, investment in the most polluting form of electricity generation. We said they should take more urgent and ambitious steps to develop CCS. They should also make it clear that unabated coal-fired power stations will not be allowed to operate in the longer term. Our view, incidentally, is absolutely consistent with what the Energy and Climate Change Committee has said since our report was published.
The Government have made much of the concept of CCS readiness, meaning the planning consent given when a new plant fulfils certain conditions that would enable CCS to be fitted at some point in the future. That has been included in a handful of gas-fired power stations. However, it was clear from the evidence we heard that, in the absence of a Government requirement that CCS be retrofitted, CCS readiness is pretty meaningless. There is no guarantee that CCS will ever be fitted to those plants, even when that is a condition of granting planning permission.
The price of carbon is currently far too low, and too volatile, to drive the necessary investment in CCS. Given the impact of the economic recession on the EU ETS, particularly on phase 2, the carbon price is likely to remain too low for several years, so we urge the Government to look at feed-in tariffs for CCS or some other funding mechanism.
Britain cannot meet its carbon budgets in the long term if it allows the prolonged operation of unabated coal-fired power stations. The Government should use some kind of emissions performance standard to terminate the most polluting forms of power generation and warn industry that unabated coal-fired power generation has no future. Given the failure of the Copenhagen summit to reach international agreement about emissions reduction targets, more attention could usefully be paid to the international use of emissions performance standards, perhaps on a nation-wide, average basis, which would allow countries some freedom to decide on their energy mix, but within a gradually reducing emissions performance standard target. I believe that, as we do not have agreement on emissions reduction targets, we should examine how emissions performance standards could be introduced as a much less threatening mechanism for a developing country, because they say to them that we want them to improve the efficiency of their generation industry, reducing its carbon footprint, rather than put an absolute limit on it. At least that would mean that investment in new capacity would tend to take place in low-carbon forms of electricity generation.
Emissions performance standards have rightly been the subject of debate between all three main parties in the Energy Bill Committee. Does the hon. Gentleman remember—if not, perhaps he could check later—whether there was any correspondence between the Environmental Audit Committee and the European Commission, either during the Committee’s inquiry or subsequently, on the compatibility of a national project for emissions performance standards with EU policy?
The hon. Gentleman raises an interesting point. I do not recall any correspondence, but that is certainly a subject we touched on in our conversations with the Commission, and we intend to continue doing so, for the reasons I have already given. I emphasise, although it was not questioned, that I speak here in my capacity as the Committee Chairman, not for the Conservative party—many of my colleagues did not think I spoke for the party even when I was the shadow spokesman, because my views tended to be at the green extreme of the spectrum.
We published our report in July 2008. It took more than a year for the Government’s response to appear, and when it eventually did it was published as a Command Paper. In October 2008, after the summer recess, we received a response from the Department for Business, Enterprise and Regulatory Reform, as it was then called, just as the Department of Energy and Climate Change was being created. I must say that members of the Committee from all parties were absolutely dismayed by the contents of DBERR’s initial response, so much so that we wrote to the new Secretary of State for Energy and Climate Change and asked whether the Government would like to reconsider their response. We refrained from embarrassing them by publishing what had come from DBERR, which we would have been entitled to do and were happy to give the Secretary of State some time to, produce another response.
Meanwhile, it appeared that several policy changes were being made, some of which were announced in the 2009 Budget, and we were pleased to see that many of those changes took on board the Committee’s recommendations. There was a further delay to the new response while DECC awaited the outcome of its consultation in June 2009 on the framework for the development of clean coal. By the end of July, a response was ready, but as the House had risen for the recess, DECC published it as a Command Paper in August. A few administrative hiccups in DECC meant that the Committee was unaware of the response until October 2009, when I was having a private meeting with the Secretary of State and he produced the document, which I had not previously seen.
However, in October last year, when he was giving evidence on carbon budgets to the Committee, he said:
“I think your Committee wrote a very good report on this, which I think the previous Department disagreed with and I agreed with and, indeed, said so in my response.”
We warmly welcomed that, and I congratulate the Secretary of State, with whom I agree on a whole range of issues relating to climate change. He has overseen, and probably led, a significant change in Government policy on that subject, and that is extremely welcome. I note in passing that if DBERR was capable, as late as October 2008, of producing a response of the sort it did for our report, it is dismaying to think how out of touch and backward looking sections of that Department must then have been.
Indeed, where have they gone? No doubt things are very different under Lord Mandelson.
I welcome the fact that the published response to the report accepted many of our recommendations. It confirmed the Government’s commitment to expand the CCS demonstration programme and set out what was being done to take forward the competition and support the development of individual CCS components. The Committee had called for a more strategic approach to the development of CCS, and the Government’s response on a framework for the development of clean coal and the energy national policy statements provides some detail on its development in the UK.
The response also described the development of a strategy for the international development of CCS. It noted that the EU’s ambition was to have 12 CCS plants operational by 2015, and a further €1 billion was made available for CCS projects in April 2009. That is welcome, but unless Britain advances its plans there is a risk that it will be other member states that build a competitive advantage in CCS. Other EU countries may position themselves better to make money from selling and installing CCS technologies in parts of the world where they must be fitted if there is to be any hope of getting global emissions to peak. There is therefore a risk that Britain will once again miss out on the chance to build a world-class industry because it has failed to harness UK creativity and innovation. That would be a tragedy in a field where the global market is potentially truly enormous, and I hope that the Minister will comment on that.
In their response, the Government stressed that coal still has a vital role to play, but Britain must be cautious about the investments that it makes in fossil-fuel-powered generating capacity, because there is a real danger that we could lock ourselves into a high-emissions pathway. If it turns out that we have made investments in assets that must be retired before the end of their economic lives, billions of pounds will have been wasted. Having said that, I welcome the Government’s acceptance of the Committee’s recommendation to step up efforts to drive forward the development of CCS and their recognition of a possible role for emissions performance standards. I also welcome their decision to scale up their financial support for CCS by funding up to four CCS demonstration projects.
Requiring any new coal-fired power station to demonstrate CCS on at least 300 MW of its operating capacity from day one, however, looks inadequate. Although that figure is much higher than the target for the original competition, it still probably represents only a quarter of typical output. At that level, we cannot be sure that we will get enough information to know whether CCS is technically and economically viable. Requiring new coal-fired power stations to retrofit CCS to full capacity within five years of its having been proven is the very minimum expectation that we should place on the industry. Preparing for the possibility that CCS will not be proven by considering emissions performance standards is another urgent matter.
In line with the Committee’s recommendation that the demonstration project be extended, the 2009 Budget announced an extension covering up to four sites and including pre-combustion and post-combustion technology. Up to four means two to four, so at least one more site will be built then would have been built under the original arrangements, which covered only post-combustion technology. I understand from the Government’s response to the Committee on Climate Change, which was published earlier this month, that they are considering only two bids, but that another round of the competition will be launched towards the end of the year. Perhaps the Minister can clarify that when he replies.
I am grateful to the Minister for that clarification. I hope that that means that the Government are confident that when they respond to the bids, we will be able to gain the information that we need to answer the questions about the technical and economic viability of CCS. I look forward to what the Minister has to say on that.
The Budget also announced extra research funding for companies in the existing competition. The recently published energy national policy statement recognised that CCS is unlikely to be built without financial support. It also recognised that planning consent will be given without reference to the allocation of funding, so more applications may receive planning consent than are able to secure funding. The Government have consulted on how a reliable funding stream can be developed for CCS, and there are proposals in the Energy Bill, which is currently before the House. Ofgem will have a role in relation to CCS and in managing the vehicles for funding and monitoring CCS demonstration projects, and I hope that the Minister can tell us a bit about what Ofgem has done to ensure that it has the right people and skills to fulfil that role. The Committee on Climate Change has made it clear that decisions on financing CCS will need to be taken in 2016 if finance is to be in place to support its roll-out in the early 2020s.
The framework for clean coal, which was published around the same time as the energy national policy statement, makes it clear that the Government’s ambition is for CCS to be ready for widespread deployment from 2020. Once again, that ambition is the minimum that the Government should aim for—2020 is still quite a long way away. The Secretary of State made it clear that the framework’s objectives are to advance the development of CCS, improve its affordability, ensure the diversity and security of energy supplies in Britain and create jobs and opportunities for UK businesses. I am sure that we all strongly endorse those aims.
The framework also envisages all new coal-fired power stations fitting CCS by 2025, which implies that some generating capacity may not do that for another 14 years. The energy national policy statement made it clear that the Government plan to report on the status of CCS by 2018 in the light of the progress made by the demonstration projects. That review will consider the framework in which coal-fired power stations would be constructed beyond the demonstration phase. If CCS is not proven, the national policy statement suggests that we will need a regulatory approach to managing emissions—one that is consistent with, and complementary to, the EU ETS and which might, therefore, be an emissions performance standard. Can the Minister reassure us that there will be adequate time to take all the necessary actions between the report on CCS in 2018 and the 2020 target date for CCS to be ready for widespread deployment?
The advice of the Committee on Climate Change makes it clear that power generation must be almost completely decarbonised by 2030, and it has talked about a 90 per cent. cut, which my Committee certainly endorses. If progress is made on CCS in 2018 and it is deployed on all new coal-fired power stations from 2025, that would appear at first glance to be consistent with what needs to be done domestically. However, the advice from the Committee on Climate Change is equally clear that global emissions must peak in the next five or six years, and certainly by 2020, if the world is to have any chance of meeting its climate change objectives. It therefore looks impossible for the UK’s work on CCS to make any real contribution to efforts to achieve a global emissions peak by 2020. That is a disappointing outcome and it is the direct result of the neglect of CCS and, I am sorry to say, the scandalously lethargic attitude that the Government showed for quite a number of years, until they woke up a couple of years ago and started to do something.
Britain has not built a new coal-fired power station since 1974, but pressures on energy security, fluctuations in gas prices and the prospect, however distant, of clean coal technology have all increased interest in new coal-fired power stations. The irony is that CCS may have contributed to the resurgence of the prospects of coal.
CCS must play a decisive role in reducing emissions domestically and internationally. If we act too slowly now, the British effort to develop CCS will play no part in the effort to get global emissions to peak by the late 2020s; indeed, it may already be too late. Far more urgent action is needed if Britain is serious about gaining any competitive advantage on CCS. Active efforts are being made elsewhere, and what we are doing may be too little, too late compared with what our competitors are doing abroad. It remains unclear who bears the risk if CCS is not ready and what action will be taken if it is not proven. That uncertainty does not help to generate the investment that the Government are trying to encourage.
The initial delay in responding to my Committee’s report was disappointing, but we welcome the fact that so many of our recommendations have been recognised in the reshaped CCS policy. There is some distance still to travel, and the Government must show that they are treating this issue with the urgency with which they promised to treat it way back in the 2003 energy White Paper. I commend my report to hon. Members.
I thank the hon. Member for South Suffolk (Mr. Yeo) for his very fair presentation of the contents of the report and the events that have occurred since it was published.
The Committee’s report on carbon capture and storage highlights the importance of CCS as an option for tackling climate change and ensuring our long-term energy security. It also raises a number of important issues, which the hon. Gentleman has discussed, and I thank him and his Committee for their clear and well-presented report, which has indeed assisted the development of policy in the ways that he described.
As the hon. Gentleman said, the report was published in July 2008. At about the time that there should have been a Government response, the Department of Energy and Climate Change was created, and there was some delay in producing a proper response. I apologise unreservedly for that delay and I hope that the response that was eventually published, as well as what I say today, will satisfy the Committee that its report has been given the consideration that it deserves and has influenced the direction of Government policy. I want to argue that we have made significant progress with our policies for clean coal and carbon capture and storage, much of which takes up the helpful comments made by the Committee in its report.
First, I want to set out why coal matters to the UK and the rest of the world. As the hon. Member for South Suffolk said, fossil fuels are an abundant and relatively cheap fuel, and they are likely to remain an important source of electricity generation. Coal power stations play a vital role in providing the UK with reliable electricity supplies, providing about a third of our electricity. They can be operated flexibly in response to variations in demand, and that flexibility will become increasingly important as we see growth in variable renewables such as wind power. Coal will also continue to power the growth of major economies such as China and India. In 2008 China and India were opening, on average, a new coal power station every week. The recently published “World Energy Outlook 2009” predicts that demand for coal-powered generation will increase by some 70 per cent. over the period to 2030. The hon. Member for South Suffolk quoted that statistic from the International Energy Agency. Coal is, therefore, clearly still an important fuel, and our dependency on it looks set to grow.
However, a coal-fired power station emits about twice the carbon dioxide of an equivalent gas-powered station. If coal is to remain part of the electricity mix and the world is to meet its climate change objectives, it is essential that CCS should become an established technology. We all enjoy, and will want to continue to enjoy, the high level of security of supply delivered by the integrated national electricity system, but it has to be low carbon, and so we all stand to benefit from the development of CCS. I remind hon. Members that CCS has the potential to reduce emissions from fossil fuel power stations and industrial installations by around 90 per cent., while at the same time enabling fossil fuels to continue to be an important element of a secure and diverse energy mix. CCS can also create economic opportunities for the UK and reduce the cost of tackling climate change.
The 90 per cent. figure that the Minister has just quoted is a familiar one in Government statements, and we have heard it often. Is it a technically concluded figure? Is it the scientific assessment that the kit would be able to do only that, or is it the best estimate of the likely acceptability to the owners of the plant? I am just trying to probe what evidence has been given for that figure.
Clearly, we are talking about a technology that has not yet been proven to work, so I certainly cannot say that I am going by world experience. That figure is what the people who put forward the technology predict will be its efficacy. I take the hon. Gentleman’s point that we should be guarded about accepting it. Nevertheless, as he said, it is the accepted figure across the industry.
Those factors explain why any credible strategy for tackling climate change must include the development of CCS technology.
The 2005 G8 summit at Gleneagles introduced a package of measures to combat climate change, one of which was to develop cleaner fuels and accelerate the development and commercialisation of CCS technology. Since then, we have made enormous progress in the UK to achieve that. In 2006 we launched a call under the Environmental Transformation Fund for projects demonstrating carbon abatement technologies, followed by a second call in 2009. There are now such demonstrations in this country. In 2007 we launched the first competition in the world to build a commercial-scale CCS project. Through the Energy Act 2008 we created a comprehensive regulatory regime for the storage of carbon dioxide in geological formations. Again, we were the first country in the world to bring in such regulation. Through the Climate Change Act 2008 we increased our 2050 target for a reduction in greenhouse gas emissions to an 80 per cent. cut on 1990 levels. That legally binding target is an ambitious plan showing that we are wholly committed to creating a low-carbon economy, in which CCS will play an important part.
In summer 2009 the Government published the UK low carbon transition plan, which plots how the UK will meet a 34 per cent. cut in emissions on 1990 levels by 2020. The transition plan takes a cost-effective route to reducing carbon and is the most systematic response to climate change of any major developed economy. Our plan includes the development and eventual wide-scale deployment of CCS.
In April 2009, ahead of our low carbon transition plan, we outlined our proposals for a new regime for new coal-fired power stations, and we launched a consultation on the detail of those proposals in June 2009. In November 2009 we confirmed our policy for a new financial and regulatory framework to drive the development of clean coal. Those policies are the most ambitious for clean coal and CCS anywhere in the world. All new large combustion power stations in the UK already have to be constructed in a way that ensures that they are meaningfully carbon capture ready. I take to heart the strictures of the Committee about what carbon capture readiness means, in relation to the advancement of the technology. Nevertheless, the requirements go considerably beyond European requirements, and require the developer to undertake an assessment of the technical feasibility of retrofit, transport and storage options, as well as providing for sufficient space for the capture facility.
Since November 2009 no new coal power stations may be built without the demonstration of CCS. That is backed up by a significant increase in the scale and ambition of our demonstration programme for CCS. We have now committed to support a world-leading programme of four commercial-scale CCS demonstrations. Both pre-combustion and post-combustion technologies will be demonstrated under the programme, and that reflects one of the Committee’s recommendations.
At the top of page 4 of their response to the Select Committee report the Government say:
“Later in 2009, we plan to publish a CCS strategy that will consider”
an agenda of items, the first of which is
“international development of CCS, including in the EU”.
Was that document published? Has its publication been delayed, or has it been subsumed in the consultation response to the framework for the development of clean coal? Unless I have missed something, I do not think I have seen it.
The hon. Gentleman in a sense steals my thunder and lets out the air in the tyres of my vehicle. That document is due—overdue, because it did not come out in the calendar year 2009—and is about to appear. I shall say more about it in a moment. It will include the list from the Government’s response to which the hon. Gentleman has referred.
Our demonstration programme will provide the platform for the necessary long-term transition to clean coal. Our ambition is to have CCS ready for wider deployment from 2020 and for any new coal plant constructed from then to have full CCS from day one.
Many hon. Members, like the hon. Member for South Suffolk today, have referred previously to the Energy Bill and its progress. The Bill was introduced in November and will put in place a new legislative framework, which is needed to deliver our programme for CCS. Specifically, it will create a new financial support mechanism for CCS, funded through a levy on electricity supplies. Such legislation is the first of a kind and will ensure the availability of financial assistance that could be worth up to £9.5 billion over the coming two decades. That is the largest single investment in CCS of any country in the world, including the United States. The Bill also includes provision for funding to retrofit supported CCS projects. That is a significant step towards ensuring that we prove the technological and commercial viability of CCS for current and future power stations. We will expect demonstration project plants to retrofit CCS to their full capacity by 2025, with the CCS financial incentive able to provide support if needed.
One theme that came through strongly in the report and was also mentioned by the hon. Member for South Suffolk is the perception of a lack of progress on CCS over the past decade. I strongly reject such claims. We have made enormous progress in several areas, which have been in line with the Committee’s recommendations. As I have already mentioned, the Government’s demonstration programme is among the most advanced and ambitious of any in the world. It is tempting, I know, to compare progress in the UK with that in other countries. However, I want to make two points about that. First, this is not a race. The Government welcome and positively encourage other Governments to develop their own demonstration projects. To that extent we have been instrumental in encouraging investment and progress in the demonstration of CCS, both in the G8 and in the European Union.
Secondly, some other countries have been quicker to announce the results of their equivalent competitions than the UK, but those countries promise more with less funding than we have earmarked in the UK.
The UK is leading international efforts on CCS through active engagement in many forums. Shortly after the G8 summit we established the North sea basin task force with Norway, looking at what steps the North sea basin countries might need to take to enable storage under the sea bed.
In 2005 an agreement called the near zero emissions coal initiative was made between China, the EU and the UK to demonstrate CCS technology in China by 2020. Following the first phase, which was to carry out research, this initiative has now moved into its second phase, which will be to select a project before moving onto the construction of the plant some time between 2015 and 2020.
The carbon sequestration leadership forum was established in 2003, bringing together ministerial-level members to develop the technologies involved in CCS. In October 2009, the UK jointly hosted the ministerial-level meeting where agreement was reached that more than 20 industrial-scale CCS demonstrations could be needed by 2020. The UK is a founder member of the recently created Global Carbon Capture and Storage Institute, established in 2009, which brings together more than 20 national Governments and more than 80 leading organisations.
In the UK we need the trinity of low-carbon fuels—renewables, nuclear and clean fossil fuels—to meet our energy needs. Internationally, there can be no solution to the problem of climate change without a solution to the issue of coal emissions. Many of the UK’s coal plants are ageing and due to close between the mid 2010s and mid 2020s. New coal power stations are important to maintain the diversity and security of energy supplies, but only if their emissions can be managed. CCS is the only suite of technologies that has the potential to substantially reduce emissions from fossil fuel power stations. But we fully recognise the challenges and know that achieving our ambitions for clean coal will not be easy.
Each step of the CCS chain—capture, transport and storage—has been demonstrated and separately shown to work, but significant technical and cost challenges are to be met before CCS can be widely deployed. The Government’s commitment to an extensive demonstration programme is intended to address these challenges.
A rolling review process, which is planned to report by 2018, will consider the appropriate regulatory and financial framework to further drive the move to clean coal. In the event that CCS is not on track to become technically or economically viable, an appropriate regulatory approach for managing emissions from coal power stations will be needed. Again, this puts into effect the Committee’s recommendation 11.
I cannot stress enough that the importance of CCS is many sided: it will bring not just environmental and energy benefits, but benefits for our economy. It is also important to recognise that CCS is not only applicable to power stations. Any large static source of emissions could potentially benefit from this technology. Taking all these opportunities together, it has been estimated that the CCS industry could sustain up to 60,000 jobs in Britain by 2030.
I pay tribute to regional development agencies and others who are working on the potential for CCS in their own areas. This is true in Yorkshire and in the north-east. I visited Durham Energy Institute last week and met Professor Jon Gluyas, who occupies what he claims is the first chair in the world for carbon capture and storage, although I think some other UK institutions would challenge his suggestion that that is the best position on carbon capture expertise, even in this country—Edinburgh comes to mind instantly. Nevertheless, that shows the enthusiasm at regional level to make a success of something that is important nationally and internationally.
Looking forward beyond 2010, we plan to release a CCS strategy this year, considering the international development of CCS, our business opportunities and jobs in this country, infrastructure development, the skills that are needed, capacity building and technology development. We have also announced the creation of an office of carbon capture and storage, about which we are currently consulting stakeholders to determine its role and objectives. In the December 2009 pre-Budget report we also confirmed that the UK will fund four demonstration projects, including our current competition that was launched in 2007. We plan to commence the selection process for the further demonstration projects later this year.
Returning to my previous question, which the Minister mentioned in his last paragraph, he said that a CCS strategy is in the pipeline, which is welcome even though it is slightly delayed. May I ask him the same question that the hon. Member for Wealden (Charles Hendry) and I asked him about another document during the Committee stage of the Energy Bill? Will it be possible, and is it not logical, to have that document in the public domain, as with the document that the Government are preparing on warm homes, in time for us to consider it before Report and Third Reading of the Energy Bill?
Because the hon. Gentleman and the hon. Member for Wealden (Charles Hendry) have raised this matter with me in Committee in respect of household energy management strategy—not today’s subject—I have experienced the delights of speaking to Whips about the management of business. I am an older man for having done that and I went greyer as I did so. Therefore, I am not going to answer the hon. Gentleman’s question in his terms, but I shall say that we are excited about that document, which is important for future development and, as the hon. Member for South Suffolk said, it is important to capture as many benefits of this process as possible for this country’s future well-being, including its economic well-being. I am anxious that we all see that document as soon as possible and we are impatient about introducing it to the world. We will do so when we can.
We are moving swiftly onwards with the progress of CCS and I hope that today’s debate helps allay any concerns that hon. Members have raised and gives confidence that the Government are committed to the delivery of an ambitious programme of four commercial-scale CCS projects by 2020, and to ensuring that appropriate technical, regulatory and commercial frameworks are developed with timely, informed decisions taken to put them in place. To take CCS forward we must raise its profile publicly. I am sure that all hon. Members agree that gaining cross-party support on this issue will go a long way towards gaining the public’s backing and acceptance.
I am conscious that the hon. Member for South Suffolk has asked several questions to which I am willing to respond, but I have been asked to reply to the whole debate at the end. I propose to save my response to those questions and to those asked by other hon. Members until the end of the debate. I hope that that is a suitable way to conclude.
The report that we are discussing is important and good. I was about to say that I was sorry that the Committee Chairman was not supported by Committee members, but the hon. Member for East Dunbartonshire (Jo Swinson) has just arrived, which is good because, as hon. Members have said, we are considering not just an important report, which should be discussed, but the Government response, which was eventually published, and the progress that has been made since the report was published, which has been set out.
Things have moved on since the report’s publication, arguably with the substantial assistance of that report’s considerations. That is a credit to the report and its contents. I say that things have moved on, but in the next few years, we want to pursue an energy strategy that is coherent; that keeps the lights on; that moves us towards an almost complete decarbonisation of our energy supplies by 2030; that keeps us on track for our 2050 climate change targets; and that keeps us within our carbon budgets as set out by the Climate Change Act 2008. Action is clearly imperative very soon if we are to ensure that our energy supplies decarbonise in that way, but also remain in place. I shall perhaps go into that further in a moment.
Although it is stated that the carbon capture and storage schemes currently being considered by the House in the Energy Bill are pilot schemes, two things are evident to me. Although a number of people say that those are experiments to see whether carbon capture and storage really works, they are essentially schemes of scale. They are about putting together the components that have already been proven in order to demonstrate that the entire system of capture, transport and sequestration works on the scale that will be required in the next few years. In that sense, they are not experiments, because we know that the components work. They are about ensuring that overall, the system works as well as it should. Four plants will be fitted with either pre-combustion or post-combustion processes. Ensuring that they open, operate and sequester their carbon is at the heart of what happens with regard to our future energy policy and the use of mineral fuels of any description.
When we talk about mineral fuels, we need to be clear on what carbon capture and storage is about in the first instance. As the Committee on Climate Change says,
“there is a longer term role for unabated gas generation reflecting lower emissions intensity and a potential role as back-up generation. The clear priority is therefore for early application of CCS to coal generation.”
That is the degree to which we should concentrate on carbon capture and storage, as regards coal generation. Should we have any coal-fired power stations in future? If we do—if we build any—in what way will the emissions from them, which clearly would be unacceptable if they were unabated into the 2020s, be addressed? In what way can those new coal-fired power stations be brought on stream? How can we ensure—the hon. Member for South Suffolk (Mr. Yeo) emphasised this point—that they are not assets that are stranded and decommissioned early in their life, and that therefore do not play a role in our future energy supply?
The Committee on Climate Change also states that
“there is no role for unabated coal-fired generation beyond the 2020s on the way to an 80 per cent. emissions reduction in 2050”.
It emphasises that it anticipates that any coal-fired power stations existing at that point would be abated. That gives rise to fairly profound considerations about what happens to our energy supply in the next 10 to 20 years. One consideration relates to the assumption that with carbon capture and storage, not only will there be a number of new coal-fired power stations built but, as importantly, the coal-fired power stations that do not close under the European large plant directive in 2015-16 may continue to operate for some time. What will happen to those particular coal-fired power stations in our energy economy during that latter period? Do they simply close because they cannot abate? Do they continue, with restricted hours? Or do we simply, whatever Government are in power at that stage, collectively throw our hands up and say, “Well, they are essential to the energy economy, so they had better continue,” even though we know that their emissions will be quite disastrous for any of our targets on carbon reduction for 2030 and certainly 2050?
I am listening to what the hon. Gentleman says with great interest. Does he not think that that perfectly illustrates the dilemma faced not only in the UK, but in the international context? If we do not manage successfully to get retrofitting technology that can be applied to all manner of coal plants, it is not just a few coal plants in the UK that might be disastrous for meeting our targets; if we consider all the coal-fired power stations in China and all the other parts of the world, we are on a path of certain destruction.
The hon. Lady is absolutely right. I am referring in the first instance to 10 coal-fired power stations that will continue to operate after 2015-16 in the UK; they are currently operating. Most of those are pretty old coal-fired power stations, and a number of those will expire of their own accord in the years not too far after 2015-16, but some, such as Drax, will, it is supposed, have a life well beyond, say, 2020. Alongside the coal-fired power stations closing in 2015-16, a number of oil-fired power stations will close under the large plant directive. Six are currently operating; they will all close.
That is significant not just in the UK, but for coal plants across the world. The hon. Lady is right: it is bad enough if we have unabated coal continuing into the 2020s in this country, but if that continues across the world, the chances of world energy supplies decarbonising as a whole will be zero. As far as the plants’ continuing emissions are concerned, if the plants continue, it is essential that they are effectively decarbonised by wholesale retrofitting and/or have limits placed on the total amount of power that they can generate in any one year. That is very important because unless we fundamentally change the way we operate the UK energy market, we will continue to have a system whereby calls for power are made to energy suppliers via a central balancing mechanism, which will involve a combination of very long-term contracts, shorter-term contracts and what one might call panic contracts, the contracts that deal with the peak of power use—metaphorically, at half-time in the cup final. Smart grids and various other devices will do a great deal to smooth those peaks. Nevertheless, the idea that there will be very long-term contracts, medium-term contracts and very short-term contracts will probably continue in the UK energy market.
One of the so-called benefits of the BETTA—British electricity trading and transmission arrangements—system with regard to energy market balancing and contract offers and acceptance is that power stations that would not normally provide major input into the load of energy on the British energy markets do not become stranded assets and do not close immediately. They play an increasingly peripheral role in the energy market, but some of their energy can be called on at peak periods if necessary. We find already that the oil-fired power stations that will close in 2015-16 have a very small run-time per year; they come on only at peak periods. A number of the older coal-fired power stations do the same. However, if those power stations simply disappear over the next 10 years, we will probably have to invent new back-up plants to ensure that our margins are large enough to give security of energy supply, enabling us to call off power at peak times.
Of course, we cannot do that with nuclear power because it cannot be turned off. It continues to provide power; it has to provide long-term contract base-load power, and cannot do otherwise. We can do that to do a considerable extent with shorter-term contracts for renewables, but we are facing an energy economy. There could be a penetration of wind into the energy economy of some 30 per cent.—a large amount of clean, good power, but not necessarily there when we want it. Whether we move to a storage energy economy, with call-off from storage, or have those plants operating as a continuing back-up is a big question for future energy policy.
However, if we use some of these plants as back-up, we return to the question raised by the hon. Member for South Suffolk of whether plants should be regarded as stranded assets, disappearing before the end of their time, or whether they should live out their natural lives as amortised assets that can provide an input into the energy economy.
If we do not have methods whereby those plants can retain a role in the energy economy over time, the Government, or private energy suppliers, will inevitably have to build a generation of plants to provide a marginal input into the energy economy. Curiously, they would never earn their keep. We would have to mothball them before they came to the end of their natural lives. We would positively have to build new back-up. That, it seems to me, is a difficult prospect to contemplate, given how the energy economy is likely to change over the next 20 years.
Keeping those plants in some form of operation is important in terms of balancing the energy economy, but the dilemma is that if those plants continue unabated, it will be inimical to our climate change targets. We need schemes to ensure that new plants are fully abated by a certain time. If new plants are to be commissioned, whether or not there is initial substantial underwriting with respect to carbon capture and storage, money will still need to be put into commissioning, investing in and developing those plants.
We need to be clear that new plants will be fully abated after a certain period. My hon. Friend the Minister underlined that after a certain time, new coal-fired plants will have to be fully abated. We should also make it clear that, should existing plants stay in our system, they, too, should be progressively abated. That, it seems to me, should be an important part of our carbon capture and storage policy.
If that is our aim, we must ask whether we can ensure that, over time, plants are made reasonably financially secure and have carbon capture and storage attached, and whether they can they do that in the time available. There are two problems related to that. First, I doubt whether those plants can simply rely on the carbon price to make carbon capture and storage, and particularly retrofitting, part of their operation. Over time, we therefore need to be prepared to ensure that, in one way or another, the underwriting is there.
We trust and hope that phase 3 of the European Union emissions trading system will produce a significant and sustainable rise in the price of carbon, perhaps through a carbon price floor. It is difficult to envisage only one country having some form of carbon price floor, because it will be exporting money to those countries that take advantage of it, at least under a European system. A carbon price floor, or some other method of ensuring that carbon capture and storage can be retrofitted, and ensuring that those plants can operate over time, is an essential aim over the next few years.
Secondly, we need to ensure security at the storage end of CCS. That is not mentioned as being part of the process; it is assumed—indeed, it has been stated on occasions—that we are extremely fortunate compared to other countries. Provided one builds new power stations reasonably near the coast, particularly the North sea coast, getting the captured carbon piped and sequestered is easier, given the number of redundant oil fields that we have in the North sea.
That is partly true, but the analysis done for the Committee on Climate Change by Pöyry Energy Consulting demonstrated that in general terms there will be enough depleted gas and oil fields, stretching out to 2030, for 10 GW capacity of coal CCS. That will give sufficient space for storage from all pilot plants, and will allow for full sequestration from the new energy plants.
I turn to the serious retrofitting of existing coal-fired plants. As I said, more than 20 GW of plant will continue after 2015-16, although Pöyry suggests that that may not be the case; it depends on when the plants go out of commission and at what rate carbon dioxide is sequestered. However, the sink size of the depleted oil and gas fields available by 2030 may not be sufficient to take all of that sequestration.
At that point, it will be necessary seriously to consider aquifer storage—that is, depleted aquifers and saline aquifers underground. That is a slightly different picture, in as much as the science on such storage is by no means as clear. The geological surveying of aquifers is not as good as that of depleted oil and gas fields. In the not-too-distant future we must move ahead on that front, in addition to the rapid progress that we are making on CCS technology for retrofitting, pre-combustion and post-combustion.
We must ensure that we are able to store in both depleted oil and gas fields and in aquifers; again, we are fortunate to have a plentiful supply of the latter in many parts of the UK. We must get the science right for that, too, so that we can not only store in the immediate future, but can deal with the long-term storage capacity for full retrofitting for coal—and, in the longer-term, the retrofitting of gas-fired power stations, which will eventually be necessary to balance our energy economy. By then, it will be very decarbonised indeed.
I commend this report, the Government’s response to it and the tremendous progress that has been made in carbon capture and storage. None the less, I do not underestimate the work that has to be done. The prize of ensuring that we in this country can use a mix of energy that is secure and substantially decarbonised, and that reaches our targets in the years to come, is one that we should acknowledge and reach out for. Hopefully, we will be successful in decarbonising our energy economy in the years to come.
Let me start where my hon. Friend the Member for Southampton, Test (Dr. Whitehead) left off, and let me say that I welcome the report. The hon. Member for South Suffolk (Mr. Yeo) was quite right to be critical of the delay in the report. It is not just his Committee that has been affected; as the chairman of the all-party group on coalfield communities and as co-chair, along with the hon. Member for Northampton, South (Mr. Binley), of the all-party group on clean coal, I have been very concerned about the delays in the report. For both all-party groups, this is not just a theoretical matter—it is real life. The APG on clean coal deals not only with the industry but with people who will, hopefully, take the process forward. As for the coalfield communities, a lot of the work that results from that process will be work that people in those communities will get involved in. Over the past year, the setting up of the Department of Energy and Climate Change has been a key feature, and it has moved things rapidly forward. We must welcome the work done by the Secretary of State, and by the Minister who is with us today.
The reality is that we live in a world where people demand not only more and more clean energy, but more and more energy. It is a very tough circle to square, but we must do it. I am talking about not just us in this country, but people across the world. At present, 81 per cent. of the energy that is produced across the world is directly provided by fossil fuels. The truth is that coal is not going to go away; it will continue to be used across the world and, more than likely—in fact, certainly—in this country. If we consider the sobering fact that a 1,000 MW coal plant generates something in the region of 6 million tonnes of carbon dioxide a year and will probably last for about 40 years, we can see the size of the problem.
As for resolving the problem, the Minister spoke about some of the avenues that are available. Nuclear energy is a possibility, as is the development of additional renewables. He missed out the key option, however, but I know that that is not because he does not believe in it. The key option is making what we do—in our homes, as regards transport and so on—more efficient. Key to that is the work being done in north-east England on the development of electric cars, of which the Department of Energy and Climate Change and the Department for Business, Innovation and Skills are very supportive. We cannot ignore the fact that fossil fuels will be needed and, to some extent, they should be welcomed in this country, but only if we get CCS right. My hon. Friend the Member for Southampton, Test, talked about the unabated nature of power plants; we cannot accept anything other than the full abatement of power plants going forward. We really need to know what we are talking about.
The reality, as is mentioned quite often, is that different parts of the CCS jigsaw are already in place. Earlier this week, a group of us visited BP in Sunbury, and we were given some really strong examples of where BP is working, across the world, to store carbon dioxide. A million tonnes a year are being stored in Salah, Algeria. The Sleipner field in the North sea off Norway has been successful. BP is piping carbon dioxide 200 miles overland from North Dakota and storing it underground in Westbury in Canada. There are also successful projects in Germany and other parts of the world. The Carbon Capture and Storage Association says that there are 50 sites in the world that are successfully storing carbon dioxide, so things are up and running as regards one part of the circle.
One of the things that is missing, which we do not talk about and which is never mentioned in the CCS debate, is the “T” word—the transport or transmission of the waste product. We have to get the carbon dioxide emissions from the power plant to where they are to be stored. Earlier this week, the Energy and Climate Change Committee said that that was one area that was not covered fully in the national policy statement. I believe that the matter will come back from the Select Committee for the Minister to consider.
If we are really serious about ensuring that the process is accurate and supported, we should seriously consider putting transmission of carbon into a national policy statement, so that it clearly forms part and parcel of the planning regime. There is no doubt about it: we might successfully go through local planning procedures; use the national policy statements so that the Independent Planning Commission can come to a view on whether a power plant should be built in a particular area; and tick all the boxes, but we must apply the same rigour to the transmission system. We need closer scrutiny of how it is being transmitted, whether it goes directly out to sea, goes underground through pipes, or is transported into ships and taken further out. I hope that we look seriously at the issue when we and the Minister come back to it following a report from the Energy and Climate Change Committee.
Another issue raised by the Select Committee is the potential problems to do with the phrase “carbon capture readiness” in the national policy statement. There is a real fear within the industry that its ability to build any plants—apart from the demonstration plants—will be restricted. That will lead to a situation where we will have the four demonstration plants working successfully within the next 10 years or so, but no others will have been built. Only when the demonstration plants are proven to work successfully, will people say, “Now we will start building.”
The industry believes that the wording in the NPS makes it difficult for it to show to the IPC’s satisfaction that a plant is viable. The truth is that, at this moment, the industry does not know whether a plant would be commercially or technically viable. I refer the Minister to the submissions put forward by the Scottish and Southern Energy group on that matter; again, that will be part and parcel of the Select Committee report.
One of the real benefits that will emerge from the CCS debate, and one of the reasons why we should go for CCS big time in this country, has to do with security of supply. The UK has huge reserves of coal. Since 1853, somewhere in the region of 23 billion tonnes of coal have been extracted from this country. It is a huge amount of coal, but it is less than 10 per cent. of the estimated total. The Coal Authority estimates that there are still 190 billion tonnes of coal beneath the UK. Clearly, much of that would not be accessible using traditional methods. Later on, I will discuss how it can be accessed.
One of my real concerns is what is happening in this country. In 2007, we were burning 43 million tonnes of imported coal, two thirds of the total. We were burning around 65 million tonnes, but 43 million tonnes of it came from abroad. Some 22 million tonnes of that came from Russia, at a cost of more than £2 billion. I raise the issue because Russian coal is cheap. Life is cheap in Russia. Seven people die for every million tonnes of coal mined in Ukraine. We would have to go back to the 1880s in this country to see death rates per million tonnes that high. In China, the rates are slightly better: only four people are killed for every million tonnes of coal mined. The official figures show that 6,000 people die in the coal mines every year in China, but most people accept that the official figures are a million miles away from the truth. The equivalent in this country was back in the 1920s.
As well as having a discussion about security of supply, this country should have a discussion about morality of supply. If we were talking about slave labour, children sewing footballs in Pakistan or sweat-shops, we would ban the relevant imports, but no one is talking about banning the import of coal from regimes that are politically unstable and that use methods that are out of this world.
There are a number of huge issues to be considered. There is the cost-versus-value debate. What is the value of a miner’s life in China or Russia? The figures suggest that it is not very high. In a recent debate in the House, I asked the hon. Member for Wealden (Charles Hendry) what he thought about the implications of the run-down of the coal industry in this country. His response was that we have had 20 years of the cheapest energy in Europe. Yes we have, because we have been burning coal on the back of the fact that thousands of people are being killed. That is not a cost that we should be happy to pay. The fact is that cheap coal has come to this country because other people abroad are working in desperate and unsafe conditions, and they are dying unnecessarily.
I want to ask the Minister whether he can fill us in on what is happening to the demonstration projects. Four demonstration projects are being put forward. We are led to believe that the market does not think that it should pay for them. One of the arguments that is always used when public bodies are transferred to the private sector is that when they transfer out, the risk is transferred out, too. I imagine that the private sector does not want to take the risk at the moment, so it is asking us to bear it.
When the Minister replies, will he give us some idea of what he expects the public commitment to the promotion of the demonstration projects to be, and what he expects the contribution of private companies to be? It seems quite clear that the private companies have us over a barrel; we have no choice but to go ahead with the projects. However, it leaves a somewhat bitter taste in my mouth, having spent 20 years of my life working for the National Coal Board.
It is quite clear that we need to drive forward carbon capture and storage, but we also need to look at the benefits of other projects. One of the projects that is being promoted in the north-east, through Newcastle university, One NorthEast—the regional development agency—and the Association of North East Councils, is the development of underground coal gasification. There is huge potential in the north-east for UCG. It has already been established that, off the north-east coast, there is the equivalent of the annual world production of coal, which could be accessed if UCG proves to be successful.
On a number of occasions, I have had discussions with the Secretary of State for Energy and Climate Change on the issue, and I have asked questions on the Floor of the House, and the Secretary of State has told me that his Department is seriously considering supporting a strategic environmental assessment for the area off the north-east coast. This week, I spoke to Newcastle university to find out to what extent that assessment has happened. The university’s response was that it had recent meetings with civil servants from the Department of Energy and Climate Change, but it has still not got the agreement to go ahead with the commissioning of a strategic environmental assessment. The Department has not said no, but quite clearly it has not said yes, and the longer it does not say yes, the longer there will be concerns about whether the assessment will happen.
The key thing about the work being done in the north-east on UCG is that it is supported by business and, as I have said, by the RDA, which has done a tremendous job in the north-east, just as the Yorkshire Forward RDA has done in the Yorkshire area, particularly with its superb work around the Humber estuary. The Association of North East Councils is another key supporter of UCG, which could be a huge success. If we can prove that UCG works, it will allow us to access coal seams that we would never have been able to access through traditional mining methods. It would also be much less labour intensive and much less costly than traditional deep coal mining.
The Minister referred to a meeting that he had with Jon Gluyas of Durham university. I just want to read out a few lines from a note that Jon sent me this morning about another potential energy source, namely the chance of extracting more oil from the oil wells in the North sea by pumping out the CO2:
“I come from the oil and gas sector, having been responsible for rehabilitating a number of old fields in the past decade and it is very clear that a significant opportunity exists to dramatically improve recovery from North Sea fields by using CO2 to enhance oil recovery. The prize could be in excess of 3 billion barrels over a 20 year period. This could consume every molecule of industrially produced CO2 from Scotland to Humberside in the same period”—
that is, if we combine UCG with CCS. He says that the project would also
“deliver an infrastructure and a skill base which would prepare us for true carbon storage, and prepare a workforce to export the technology to other parts of the globe.”
He is very clear that we have the right person with us in the ship—that is, the Minister who is here today—as he says in closing:
“Last week David Kidney visited us in Durham. He has the full story.”
I hope that when the Minister responds, he can give us that full story. I hope that he will say yes to conducting a strategic environmental assessment of the area off the north-east coast, and yes to giving us a chance to rediscover a coal industry in the north-east for the 21st century and beyond.
There is a positive story emerging from what is a huge challenge. There are big job opportunities across this country, particularly in areas of real need—areas that have been hit very hard in the past 25 years and that have never really kept pace with the rest of the country. The reality is that we can access huge amounts of our own resources, so that we are not reliant on unstable and immoral sources of energy. That could have a huge impact on the climate change issue, and it will negate the need for any more open-cast mining. There is huge potential for the export of technology and expertise, but that export will happen only if we get on with things.
I want to raise a final issue. We are all aware in this House of how close we are to a general election. The truth is that this debate is, to some extent, above party politics, because it is genuinely about the national interest, and even the international interest. So I will listen with great interest to what both Opposition spokespersons—the hon. Members for North Southwark and Bermondsey (Simon Hughes), and for Wealden—have to say today. I am very pleased with what I have heard from Conservatives about their conversion, once again, to coal; the reality is that they see coal as a resource that we should use much more, and they think that we need to put the matter right.
I am also happy that the hon. Member for North Southwark and Bermondsey, the Liberal Democrat spokesperson, is here today, because in discussions that we have had in the past about coal, I have always found his contributions to be both sensible and balanced.
However, I must say that that is in stark contrast to some of the discussions that I have had locally in the north-east with the Liberal Democrats. Their attitude is that anybody who says anything positive about coal is waving the bogey flag and is very much in favour of open-cast coal mining. I refer to a discussion that took place in my constituency about an open-cast site at Skons Park. For the benefit of Hansard, that is spelled Skons, not Scones, as the Liberal Democrat parliamentary candidate in Blaydon thought. Perhaps if he lived there, he would know that. However, he will have plenty of time to find out the correct spelling next year, when he can walk around doing nothing.
The reality is that carbon capture and storage is a very important subject and we need to get it right. It is potentially hugely important for this country, and the key thing is to get on with it.
First, I thank the hon. Member for South Suffolk (Mr. Yeo), not only for his Committee’s report—I ask him to pass on our thanks to his colleagues on the Committee for it—but for his enthusiastic advocacy of the case that is made in his report and his enthusiasm for the issues in the brief covered by his Committee. He knows that that enthusiasm is widely appreciated. Furthermore, he was his traditional robust and independently-minded self today.
Although the hon. Gentleman would no doubt have wished for whole armies of people from his Committee to come and support him today, it is good that at least one member of the Committee—my hon. Friend the Member for East Dunbartonshire (Jo Swinson)—was here. She apologises for the fact that she has had to leave. I know that she had expressed a desire to be here for the whole debate and I know that she and my hon. Friend the Member for Cheltenham (Martin Horwood) are both wedded to working with the hon. Gentleman and his Committee in their work.
Just because I think that it would work best, I next want to address the points made by the hon. Member for Blaydon (Mr. Anderson), whose views and experience I respect. He has heard me talk in Westminster Hall and elsewhere. I hope that I have been very clear before, and I hope to be very clear again today, on these matters.
I do not think that it is accidental that if someone comes, in part, from a Welsh family and they are brought up, in part, in south Wales, and they lived near communities such as Aberfan, and they went down coal mines when they were at secondary school, they have some emotional and historical political commitment to the coal industry. I do, personally; I always have, and I have always made sure, when I have done this job, that my party has as clear a message as is possible that the coal industry has played, should continue to play and will play in the future an important part in providing the energy that this country needs.
It is a testimony to the work done by people in the coal industry that on the occasions when there have been tragedies—there have been tragedies and not only in south Wales, but in other parts of the United Kingdom—people have learned from those tragedies and safety has been improved and, as a result, people will hopefully be prevented in the future from suffering injury or worse.
I was entirely opposed to the strategy of Lord Heseltine when he was Secretary of State for Energy and of Mrs. Thatcher when she was Prime Minister because of the way in which they effectively went about undermining the whole of the coal industry in the 1980s and 1990s. I had not long been elected to the House and was certain about the position then, so I hope that my record is clear. I will say such things as strongly in Blaydon and the north-east as in any other part of the United Kingdom.
The hon. Gentleman was wise enough to say that if we want to have the coal industry that we wish for, it must, as the Government—and, it is fair to say, the Conservatives—have made clear, include the new protection for our climate and environment that is now on the horizon. That is what carbon capture and storage debates are about. That is the way to proceed, and the good news is that everybody has now signed up to it. Although there was some delay and we were slow off the mark, it is to the credit of the present Secretary of State and his team, as I have said publicly, that things have moved much more quickly since the new Department was formed.
So that that statement is not misinterpreted—although I do not resile from it at all—my party, if we are in a position to influence the issue after the next election, would wish for a reconstituted Government to bring back together the Department for Environment, Food and Rural Affairs, the Department of Energy and Climate Change and the Department for Transport. To be clear, that does not undermine my view of the importance of the energy and climate change agenda, but if we want less top-heavy government, those Departments should be brought back together.
The hon. Gentleman spoke about how coal is produced around the world. I absolutely understand his view and the passion with which he speaks. Coming as I do from the Liberal Democrat party and the liberal tradition, I do not think that tariff barriers or protectionism are the right answer, but we as a world absolutely need to ensure that we manage industrial practices in coal production safely, not only on this continent, which produces large amounts of coal in places such as Poland, but in other places. East of the European Union, coal is produced in Ukraine, which I support as a country—not least at the moment, as it is the middle of its crucial presidential election campaign—and in China and elsewhere.
There has been a failure of international responsibility, not just in China and Europe but in Latin America and other places. People have lost their lives as a result of industry practices. The International Energy Agency and other international authorities, such as the World Health Organisation and other UN institutions in Geneva, must take a much more proactive view of such issues. It is not acceptable that other countries should be able to increase their competitiveness and reduce prices by cutting corners and bypassing basic safety requirements.
I hope that our Government and the European Union are as strong as we can be on such issues. We need to ensure production at a fair price. There may be competition, and we may not always be able to produce the cheapest coal, but we have a duty internationally to ensure that people do not lose their lives and livelihoods as a result of exploitation by coal industries elsewhere, whether state run or privately run.
Will the hon. Gentleman add to his remarks on the necessary international regulation of good practice in coal mining his thoughts on coal fires in many parts of the world? Coal fires are closely related to bad practice in coal mining, add substantially to CO2 emissions in their own right and often continue uncontrolled for many years underground while coal mining is taking place alongside them.
I do not know whether you have ever been down a mine, Mr. Key—this is not meant as a challenge—but if you have, as I have done on more than one occasion, you will have seen the circumstances in which people do underground mining: the proximity, discomfort and danger, and the bravery and skill required. Practices such as the hon. Gentleman describes are completely unacceptable, and we need to add that to the agenda.
The hon. Gentleman’s comments always take our debates to a new tier. Those of us who are laypeople in debates such as this go around the circuit, and then when he speaks, we must all raise our game and our attentiveness, because he rightfully puts things in a more scientific context. We are grateful for that. I am sure that the Minister, for whom I will have questions in a moment, is focused on exactly what storage capacity we as a country will have, where it will be and what storage will be safe and appropriate. The comments of the hon. Member for Southampton, Test were extremely wise in that context.
I do not want to make either a long speech or a greatly partisan one. All of us—the Minister, the hon. Member for Wealden (Charles Hendry) and the other hon. Members in this debate—have been around the circuit before, recently and often, so I hope that our positions are clear. I will make a couple of general propositions, and then I have a set of questions for the Minister, arising from what he has said and from this debate. I will not repeat questions that I have asked him in Committee, with one exception.
Somebody said to me today—I do not mean this to be unnecessarily fawning—“I have never understood why the hon. Member for Stafford (Mr. Kidney) wasn’t promoted to ministerial office much earlier. He’s clearly capable of it and has done very well.” We are grateful for his engagement with his brief. We are sorry that his hair is going grey as a result of his dealing with business managers, but we do not mind so much as long as he delivers the goods and we get the secrets.
We were encouraged by the mysterious statement this morning by the Leader of the House, which announced the business for next week and the provisional business for Monday the following week, but was noticeably silent about the two remaining days. We hope that that means that there is still an opportunity for the documents that we in the Opposition—and, I think, the Minister’s Back Benchers—would like to see before the Report stage of the Energy Bill. I ask not least so that we can formulate intelligent new clauses and amendments and make maximum progress on the Bill.
I want to address a few points in sequence, as that will be easiest. It will not take long. On page 3 of the Government response, published last August, the Government reply to the first recommendation, concerning competition. The reply states:
“In addition to our support for commercial-scale CCS demonstration, we continue to support the development of a wide variety of CCS components through our support for research, development and demonstration via the Technology Strategy Board (TSB), the Energy Technologies Institute (ETI) and the Environmental Transformation Fund (ETF). For example…DECC’s Environmental Transformation Fund (ETF) includes support for CCS through the Carbon Abatement Technologies Demonstration Programme. To date some £2.2 million has been committed to one project for the demonstration of a 40MWt Oxyfuel combustion system.”
When the Minister winds up, will he put on record what has been done in relation to that programme and whether any further developments in that programme are planned?
I have prompted the Minister about the CCS strategy document. I am encouraged to hear that it is imminent. To pick up on part of the speech made by the hon. Member for Southampton, Test, what storage capacity do we think is in the UK and around the British isles? The Committee’s fourth recommendation says:
“Unless the Government is able to show there is sufficient storage capacity there must be some question about the long-term viability of CCS.”
The Government’s response was:
“Previous work funded by Government and undertaken by the British Geological Survey (BGS) gives a good level of confidence about the storage capacity of the British Isles. This study estimated that the total quantified storage capacity exceeds 7.5 Gt and may exceed 22Gt (this range is due to uncertainty on saline aquifer capacity). The lower end of the range relates to already well-characterised storage sites and should be sufficient to meet UK needs for many decades to come. Additionally, we might expect closer geological analysis of aquifers to validate further viable storage capacity of the UK within the range cited above. Importantly, some saline aquifers have already been proven suitable for storage of carbon dioxide.”
From what I understand, the saline aquifer element of the storage capacity is very important. Obviously, it is important that we do not lose it: that when the site is finished with it is blocked and made safe. It would be helpful to hear the Minister’s estimate of our current capacity and what work is being done. What is the process? Is there an annual assessment of what the score is and what is coming on line? What are the consultations and considerations about whether we might ever need to use, for example, storage that the Dutch or our other neighbours, such as the Irish, might have, to be part of a grid working with them?
I want to say in passing that I was amused to see the response to recommendation 9 about the need for a “dramatic technological development”:
“The Government agrees that we cannot continue with business as usual”.
That seems to be a theme picked up by all parties, and Amen say all of us.
Lastly, recommendation 14 states:
“In our Report on the 2007 Pre-Budget Report we recommended that the Government ‘introduce some form of financial mechanism for incentivising CCS power plants over conventional power stations’, such as a feed-in tariff for CCS plants, or contracts which guarantee funding for the difference in costs between CCS and conventional plants.”
We have talked about the competition; we have talked about an emissions performance standard in other contexts. The Committee on Climate Change is clear that the carbon markets—the EU emissions trading system—may not be sufficient as a mechanism for dealing with that. Will the Minister tell us the Government’s present thinking about the role of feed-in tariffs? Will they consult further on them? I am not aware of having heard the Government speak about that since they gave their response. Might there be other ways to use financial mechanisms? I do not mean for the competition; I am talking about what happens post-competition for the development of carbon capture and storage.
Those are the issues that come directly from the Government’s response. My party is clear: the country will need oil and gas for as long as we have them. We shall need to use our coal, but there should be CCS. We have debated how hard-line the requirements should be in advance. We should like them to be as tough as possible. I accept the points that were made in Committee by the hon. Member for Wealden that there are technical limits to how near to 100 per cent. it is possible to get. One cannot be naive about that. We started from an absolutist position, but there must be compromise, and I remember the hon. Gentleman’s perfectly valid points about the fact that when a plant is powered up it may not be possible to prevent the escape of some emissions. Also, occasionally—I buy that qualification, too—there will be a need to allow coal-powered stations to be used, even if they do not fully comply, if the nation needs them. Those were three good and reasonable qualifications. Some collaborative work is being done on trying to agree some common wording on Report that will be acceptable to many in the three major parties—and, I anticipate, the Scottish National party—which we hope the Government will accept. That will be an important part of the debate.
The Liberal Democrats think that renewables are a fantastic possibility for this country, and not just as onshore and offshore wind power. In urban areas such as that of the hon. Member for Blaydon in the north-east, there are fantastic sites along the coast in the old ports. Those are good sites that do not give offence to people and are obvious places for the industry, and for job creation. Liverpool is another good place for that. We must consider our old industrial cities and towns, on the east coast in particular, in Scotland and England along the major rivers, to make sure that we take that capacity. In addition, we have a fantastic opportunity for tidal power. Hon. Members have heard me say before that we do not believe nuclear should play a part; we are opposed to the development of the nuclear industry, which is expensive, always late, dangerous, and environmentally far less susceptible of control or influence by the public. We can meet our energy needs, provided that we are energy-efficient, with the other mix. Although in faith terms I am a Trinitarian, I am not a Trinitarian with the same trinity that the Minister promotes in terms of the fuel mix for the future. Nuclear should not be part of that trinity—indeed, it makes it an unholy trinity of energy, not a holy one.
A fantastic piece of work has helpfully been done by the Committee on Climate Change, which we all value greatly. Would the Minister be kind enough—we went into this subject a bit—to touch on the closeness of the Government position, because I am still slightly confused about the proposal in chapter 4 of their October report on the framework for investment in conventional coal generation. On page 134 of that report, they make four recommendations. I would be interested to hear whether the Minister agrees with each of those four recommendations. His answers on that have not been as clear as I would would like.
I shall make my last two points. In relation to “A Framework for the Development of Clean Coal”, which is obviously the latest Government document we have, I have some questions principally about timetable. However, in passing, I note—the hon. Member for South Suffolk who opened the debate referred to this—that the figures the International Energy Agency produce are outstanding. He was clear about how important they are. We need to pause for a second to reflect on how significant they are. In 2008, the IEA predicted that the amount of electricity generated from coal could increase by around 23 per cent. in the US, around 172 per cent. in China and around 258 per cent. in India between 2006 and 2030. That is phenomenal.
Given the context that the hon. Member for Blaydon reminded us about, it is vital that we deal with the way of production, as well as with the volume of production and the technology for dealing with the carbon capture. The Government reminded us that the IEA estimates we will need 100 CCS projects globally by 2020, although I accept that that includes gas. My other questions are as follows. In paragraph 1.14 of “A Framework for the Development of Clean Coal”—I am conscious that there is also the energy policy, which includes coal—the Government state:
“We are currently working with industry and stakeholders on development of a 2050 roadmap setting out possible pathways to a low carbon UK, which will be published in Spring 2010.”
My question is predictable: will the Minister please tell us whether that is still on target and if it will be published before the general election?
Importantly, on a matter of great concern to all of us, in paragraph 1.19, the Government make the point that one of the objectives of the transition to clean coal is to
“Help create jobs and economic opportunities for UK-based businesses in a new industrial sector.”
I agree, but what is the number of jobs that the Minister believes, looking forward, is likely to come from this sector? I think all of us have a regional and a national interest in the answer to that, because it is important technology. Just to clarify—there are lots of people with an interest in this—paragraph 1.25 states:
“On 6 November 2009, we received two bids to proceed to this next stage of the competition,”
to which the Minister has already referred. It goes on to state:
“We have the option to fund up to two FEED studies and the successful bidder(s) will be announced early next year, when we have evaluated the bids.”
Will the Minister say when that will be? In paragraph 1.28—
With the greatest respect, it is not. I have the Government response to the Committee’s report in front of me. The hon. Gentleman is referring to something completely different that we are not debating this afternoon. Will he kindly return to order?
Mr. Key, I was not aware I was not in order. I had dealt with the Government’s response to the Committee report and was seeking to deal with the other report that the Minister mentioned earlier. I will ensure that I generalise rather than deal specifically with the other matters. Some other dates were mentioned. Let me summarise. The Minister mentioned a Government report for the implementation of carbon capture and storage. It would be helpful if he said when he thinks those announcements will be made.
Finally, I should like to mention the future of CCS and its compatibility with the European Union, which we touched on when we last debated this matter. The Minister of State, Department of Energy and Climate Change, the hon. Member for Lewisham, Deptford (Joan Ruddock) said in her reply last week that there was further correspondence between her Department and the EU. A request was made that that correspondence should be made public so that we could see the latest position. It would help if the Minister said whether that is now possible, whether that confirms or changes the Government’s position on how acceptable the various CCS options are as technologies and whether they will still regard the emissions performance standard as a key component part of their policy for dealing with a new generation of coal-fired power stations.
This debate is of interest both strategically and technically. It is good that we have an Environmental Audit Committee to bring these matters to us. This debate, though much delayed because of the reasons given by the hon. Member for South Suffolk, will allow people to see the commitment to the project. Everybody, including this Government before the election or whoever is in government after it, will now want things to move forward as quickly as possible.
May I echo the words of my hon. Friend the Member for South Suffolk (Mr. Yeo), who spoke of his sadness at the fact that you, Mr. Key, will be leaving the House at the election? You bring tremendous knowledge and expertise to debates and Parliament will be poorer for not having your wisdom after the election.
I commend my hon. Friend for the way in which he introduced an excellent, robust report that has given us tremendous food for thought. I commend his Committee for producing that detailed report.
We have had to wait rather a long time for a debate on this subject. The report was about 13 pages long, but we have waited 13 months for a response from the Minister. The Government clearly work at the rate of a page a month, but perhaps they could work faster in future.
Although we have not been overwhelmed by the number of colleagues during this debate, we have had a significant amount of quality. The contribution of the hon. Member for Southampton, Test (Dr. Whitehead) showed the expertise that he brings to the subject, which he has brought to so many energy issues, and the contribution of the hon. Member for Blaydon (Mr. Anderson) showed the passion that he brings to such debates. I should, however, like to correct him in respect of our exchange in the Chamber in a previous debate. I said, in response to an intervention from him:
“In the 1980s, we set the market framework that delivered the cheapest energy prices in Europe for the next 20 years. The model has worked, and it has been pretty robust up to now.”—[Official Report, 13 January 2010; Vol. 503, c. 795.]
That was a reference to the move towards cheap domestic gas. I was not in any way suggesting that I wish to have cheap prices based on miners dying because they are working in unsafe mines elsewhere around the world. I hope that he will accept that there will always be a need for imports, sometimes because of the qualities of different types of coal needed for certain operations. British coal mining enjoys some of the highest standards in the world, which we want to see in force in countries from which we import coal.
The question was not specifically about coal. The hon. Gentleman talked about the Conservative party devastating the coal industry and privatising the utilities and, more generally, about energy policy. Perhaps we were talking about different issues, in which case I hope this exchange has been useful in clarifying that.
I hope that one of the issues that come through clearly is that coal is now uniting political parties and politicians. It has been one of the most divisive energy issues over recent decades, but now there is an overwhelming desire among politicians of all parties to see a revived coal industry in Britain, based on a bright future for coal in the energy mix with carbon capture and storage. The report we are debating is an important contribution towards that.
My hon. Friend the Member for South Suffolk rightly mentioned the urgency with which the issues must be addressed. In the recent coal period, coal generated more than 40 per cent. of the electricity used in this country, so it is still a significant player. However, we can already see that by 2016, as a result of the large combustion plant directive, a third of our coal plant will be out of commission. If the industrial emissions directive goes through, most of the rest of our coal plant will be closing by the early 2020s, so there is a significant need for new investment in plant, and from our perspective that must be genuinely clean coal with CCS.
I am pleased that the Minister was given the chance to give an initial reaction to the debate. I noticed a slight change in his tone: he moved from saying, “We are leading the world” to, “This is not a race.” That is the argument my children tend to use: the one who wins the race says, “I am the winner”, and the one who comes second says, “Well, I wasn’t actually racing anyway.” We must recognise that there is a race. There is a race against time, because we do not have time on our side if we are to get the new capacity built and implement the measures necessary to reduce our carbon emissions, and there is also a global race to develop the technology, so I really do see this as a race.
There are, of course, areas for competition, but it is our view, and that of many others, that Britain is in a unique position to lead the world on that. We have the skill-sets from the North sea oil and gas industry, which can be used for the sequestration technologies that will be necessary. We have a need, we have the many years of coal supply left and we have some of the best scientists in the world operating in places such as Imperial college, Edinburgh and elsewhere. It would be an absolute tragedy if in 20 years’ time we found that CCS was a global technology, but a technology that other countries had mastered. We think that we should have a real vision of Britain leading the world in the commercial development of those technologies.
The report refers to a disappointment at the lack of progress. I think that we all accept that things have improved, but the words my hon. Friend used—“appallingly slow” and “scandalously lethargic”—summed up the earlier approach that was taken on the development of that technology. That has had a significant impact on the UK. The initial decision to go purely for post-combustion technology meant that work being done on pre-combustion technology, notably in Peterhead and some other projects, was lost. In the evidence given to the Energy Bill Committee, people made it clear that those projects were lost for good for Britain, now that Abu Dhabi has the project from Peterhead, and that we will have to struggle to catch up.
Jeff Chapman, chief executive of the Carbon Capture and Storage Association, told the Committee in evidence that it was now likely that China would be the first country to get a commercial-scale CCS coal plant operating and that Abu Dhabi would be the second country to do that. Therefore, we have lost out, and in international terms that is a matter of significant concern. The Chairman of the Environment and Climate Change Committee, the hon. Member for Sherwood (Paddy Tipping), said that it appeared to be a competition without end. In the three years that that competition has been running in the UK, Canada has had a competition that was over in one year, so there needs to be greater urgency if we are to see people really looking at investing in Britain in that technology.
The report states that there is an urgent need for a strategy for the development of CCS to give a strong signal to industry, and I absolutely agree. That is one of the reasons we tabled an amendment to the Energy Bill on the need for the Government to publish a road map within the six months after the Bill becomes an Act, should it do so. The Minister talked about a CCS strategy coming out in the next few months, but that is not far removed from a road map.
It is important to contrast what is happening in that regard with what is happening in other areas of energy policy, particularly nuclear. The road map put in place for nuclear energy means that anyone looking at that sector from outside can see whose responsibility it is to do what and by when if the first new nuclear plant is to open by 2017-18. It is exactly that road map that is missing in areas such as carbon capture and storage, and even the roll-out of renewables. I hope that the Minister will reconsider that, and that on Report the Government will indeed decide that a road map would be appropriate.
The Minister referred to the office of carbon capture and storage, and said that the Government are consulting. In the same time that the Government have taken in consulting on that office, they managed to get the Office for Nuclear Development up and running. We need a real sense of leadership. The office has an expert chief executive—one of the finest people in the department—and I hope that he will be able to give things a sense of impetus and movement. We need to move forward with greater urgency.
If we do not have an overall strategy, we will find that we are without a national interest perspective. We will find a plant being developed in the Thames estuary, with its own pipeline to the North sea; we will see another plant being developed somewhere else, again with its own pipeline. It is critical to the success of the scheme that we have oversized pipelines, so that clusters can be developed in certain areas. There will not be many in the United Kingdom. The Thames is probably one, as is the Forth, along with Teesside and Humberside. Those will be the natural clusters, but it needs Government drive and a real sense of strategy to make it happen. I hope that the Minister will review the Government’s position, and that they will accept its importance.
I would be grateful if the Minister said how we should move forward. The Energy Bill would put in place a levy, a funding system, but that still will not give an overall structure for the development of CCS. That was another issue at the heart of the report. We advocate that a body, perhaps an authority, should be set up to be responsible for the purchasing of the CO2 emissions, and for letting the contracts for the pipelines and the sequestration facilities. That would be unique in the world, and it would say to businesses large and small that the United Kingdom was determined to lead. I hope that the Minister will reflect on such initiatives and differences.
The hon. Member for North Southwark and Bermondsey (Simon Hughes) spoke of the need for gas to be incorporated. There is a tendency to focus on the coal side of the debate, but at some time gas will have to be incorporated. The Bill gives the Government the opportunity to do that. They can broaden its provisions from being related only to coal to include other technologies. I hope that the Minister will show that the Government’s responses to the report are not hollow, and that they will use the opportunities that they have to drive change forward.
The Government say that 20 GW of new power plant has been consented; 12 GW of that, or 60 per cent., is gas. Gas will play an extremely important part in our energy mix for many years to come. The people building those plants are not building them for the next few years, to see us over the shortfall before the new plants come into use; they are building them with the expectation that they will be in use for 20, 30 or 40 years. For that reason, CCS on gas becomes particularly important.
That brings me to the question of the emissions performance standard. The Select Committee report contains 15 recommendations. The Government responded to 14; the 15th did not get a mention. I hope that the Minister will explain why. That last recommendation was about the importance of an emissions performance standard. There is broad support in Parliament for that. The Conservative party has been committed to it for some time; we believe that it will be a key element in driving investment.
An emissions performance standard that was set unrealistically high would drive away investment, but investors who are looking to invest hundreds of millions of pounds in new plant should know the framework to which they will be expected to adhere. That applies to coal and, in time, to gas. I hope that the Minister understands the strength of feeling across the House that an EPS would help secure investment by giving people certainty about the investment framework. It will help them to decide positively. It would also be useful to know why the Government did not address that question in their response.
The final issue is carbon price. The Select Committee report says that we cannot rely on the price of carbon through the EU emissions trading scheme alone to drive forward. That is absolutely true; we need only look at the fluctuations within the ETS to realise that. At times, the price has been about €30 a tonne; at other times, it has fallen to 8 cents a tonne. It is hard to make investment decisions based on something that fluctuates so wildly.
The Select Committee discusses a feed-in tariff or other method of support. I hope that the Minister will consider the alternative approach of putting a floor on the price of carbon, which would help secure investment across the board in low and zero-carbon technologies. That would be helpful for investors in nuclear, CCS and renewables. I hope that he will be able to indicate the Government’s position. When he appeared before the Energy and Climate Change Committee a few weeks ago, he said that if the deal that the Government hoped for was not reached in Copenhagen, they would announce their way forward shortly afterwards. In the course of this week, we must declare our response to the Copenhagen agreement. If a carbon price announcement will be part of that, maybe he could share it with us now.
The report is thorough and is enhanced by its brevity and the clarity of its thinking and recommendations. I think that we are all united in wanting coal to play a vibrant part in the United Kingdom’s future energy mix, but it must be genuinely clean and involve carbon capture from the outset. We share the Government’s goal of having a significant number of plants. We have said 5 GW, with some degree of CCS in place, by 2020; the Government have mentioned 4 GW. We are in the same area on that issue, but if we do not have a road map or a strategy in place for delivery, it simply will not happen. I hope that the Minister can reassure us in his closing remarks and respond again to the important recommendations made in the report.
With the leave of the House, may I say that this has been a serious debate about a serious subject? It is not just for the benefit of this country that we must make carbon capture and storage work, as I said in my opening speech; it is for the benefit of the entire world.
I will respond directly to the points made by hon. Members before I end. I was grateful to the hon. Member for South Suffolk for acknowledging, among all the delays to which he referred, that the Government had introduced a regulatory regime for the storage of carbon dioxide. As I said in my speech, it was a world-leading step at the time. The European Union has caught up since then with a directive based on our legislation, although we now need to make some amendments to our scheme to comply fully with the directive.
On European funding that might assist the development of carbon capture and storage demonstration plants, the European Union has taken not one but two relevant initiatives. The first was the economic recovery package, through which the European Commission has effectively announced a number of projects that it intends to support. We read in the newspapers that one is Hatfield in the United Kingdom. I understand that the process is not yet concluded and that the European Parliament has not yet given those decisions its approval. Nevertheless, that is one route on which the European Union has made a decision. It is in hand and could benefit a United Kingdom project.
The second, which might have been the one that the hon. Gentleman had in mind, is that we in this country persuaded the European Commission and other Governments that from 2013 onwards we should set aside from the new entrant reserve of phase 3 of the EU ETS 300 million allowances for auction to raise funds for carbon capture and storage and renewables projects. That is a potentially large sum and could become available in several years’ time. We are confident that we will make a good case to the European Union for a share of that money for projects in the United Kingdom in the time scale necessary to secure them successfully. The huge levy that we propose on the electricity bill of everyone in this country to help the private sector to make a success of carbon capture and storage could be diminished by the contribution that we secure from the European Union.
Another funding point that the hon. Gentleman mentioned was that in Budget 2009, there was an announcement of a £90 million fund to enable the participants in the first competition—the two that are still proceeding with competition No. 1—to proceed to the front-end engineering and design stage after the first stage of the competition. That money is indeed available and we hope to make an announcement shortly about the participant or participants being able to spend it.
The hon. Gentleman asked about Ofgem’s expertise. We are confident that Ofgem has sufficient expertise. It deals with similar arrangements now in respect of the renewables obligation, for example, and we intend to give it a role in relation to the feed-in tariffs that begin in April. Again, we think that that role is within its expertise.
The hon. Gentleman asked about the review in 2018 and whether that would allow time to act by 2020 on the decisions that are made. 2018 is a tricky judgment call because there has to have been by then some demonstration of carbon capture and storage in order to make a judgment at all, so there is something that we have to learn from, and then, as he rightly says, the case is urgent for rolling that out as far and as fast as possible if it is successful, and we want to do that by 2020. We happened on 2018 on the basis that with our own ambitions and now the European Union’s ambitions, a number of demonstration projects will be starting by around 2015 and there should be time to learn and then time to act on the decisions that we make. I agree that it is a tight time scale, but equally I agree about the urgency of the issue.
The hon. Member for North Southwark and Bermondsey (Simon Hughes), in an intervention on me, asked about the 90 per cent. reduction in carbon emissions if CCS is successful with coal. I shall add to what I said then that the International Energy Agency cites that figure as its assessment. We can do better than 90 per cent. if we are prepared to spend more money, assuming that the technology is capable of being pushed that much further forward. For the sake of completeness, I should point out that today, some coal generators seek to reduce their emissions by co-firing coal with biomass and there is no reason why that would not continue in the future.
I thought that my hon. Friend the Member for Southampton, Test (Dr. Whitehead) did much better than I did in persuading the members of the Select Committee about the importance today of fossil fuels as part of the flexible base load in this country. As we develop, for example, much more wind power, with its variability, that flexible base load will be more not less important to the country. As we make the transition to the low-carbon future, we should not overlook the contribution that that base load will make. My hon. Friend made that point extremely well. Equally, because of that, he made the point that we have to make a judgment about the control of emissions on one hand and the times of need on the other. A good example that we can all remember is that this winter, when there was a shortage of energy to meet a huge demand in this country, it was the flexible fossil fuel base load, including coal, that came to our aid to ensure that we met that record demand.
On my hon. Friend’s point that eventually we must get round to the retrofitting of existing power stations as well as the new ones that we are talking about, I am sure that that is a forceful argument, but in terms of the Government’s position, we have focused our new interventions on new coal, for the reason that the hon. Member for North Southwark and Bermondsey gave, which is that when those power stations are built, they have a 40-year lifetime. Therefore, we think that that is the right priority, but I take the point about having to come back to the issue of retrofitting. That is why we have made the decision and announced that the levy could pay for retrofitting as well as for the first demonstration, and why we have said that we will review the situation in 2018.
My hon. Friend made the important point about sufficiency of storage for carbon dioxide. It is intended in this country that there will not be storage on land, so the surveys that have been done under the seas around this country are very important. He mentioned one survey; there have been several others, and certainly the British Geological Survey in 2006 is the one on which we rely in thinking that there are 100 years-worth of storage of our carbon dioxide emissions in safe places under the sea. However, I take the point that, although some of that capacity might consist of oil and gas fields as they are exhausted of gas and oil, some of it might be aquifers and he is right that our knowledge of those aquifers and their security, in terms of their being a safe storage place, is not complete. So, to answer a question that the hon. Member for North Southwark and Bermondsey asked me, there is ongoing surveying work, to ensure that we have sufficient information.
To conclude that point, I met with representatives of the Crown Estate earlier this week—after all, the Crown Estate is our landlord of the seas—and they are very aware of the need for this transition from oil and gas fields being producers of oil and gas to being, in the future, the storage places for carbon dioxide emissions. They are very attuned to the need to help the industries—both the current oil and gas industries and the future carbon dioxide storage industry—to make that transition a smooth one.
I think that it was my hon. Friend the Member for Blaydon (Mr. Anderson) who mentioned enhanced oil recovery. Of course, carbon dioxide might be the injectant that would be readily available at a reasonable price to help with enhanced oil recovery. Again, in my discussions with the representatives of the Crown Estate, they were alert to that point. I would also just point out to Members that, under the world-leading regulatory regime that we have established as part of the Crown Estate, we conducted a consultation in the autumn of last year about the licensing system for carbon dioxide storage. In that consultation, we proposed that the licensees of existing oil and gas fields ought to have a limited window of opportunity when they could have first call on permits for their fields as stores for carbon dioxide.
That consultation has recently closed and I do not yet know how the market has responded. Furthermore, we certainly have not made a final decision. However, I just wanted to draw attention to that consultation to show that we are alert to the link between the two sectors and the importance of securing the assets that we have now as safe storage for the future.
I thank my hon. Friend for reminding me that energy efficiency comes first, before the trinity of fuel supplies that I mentioned to him. Of course, if we can avoid using energy in the first place, we will contribute both to fighting climate change and to our security of energy supply, and we will help those people who find it difficult to afford to pay their bills to reduce their bills. Also, for businesses it is a good thing to reduce their overheads if they can. So energy efficiency—every day—should come first, and I thank him for reminding me to say that.
My hon. Friend is right about the need for further work to be done on the transportation of carbon dioxide. However, as I said to everyone in my speech, the components of carbon capture and storage have each been tested and there is transportation today, just as there is storage today, that has been proved to be successful. It is putting all those components together that is the challenge for us.
I totally agree with my hon. Friend about the UK coal industry having a place today—with 6,000 jobs—and hopefully it will have a bright future because we make a success of carbon capture and storage. Furthermore, I certainly take to heart the point that he made about the cost of our use of coal in this country that is supplied from other parts of the world, in terms of the lives that are lost producing that coal for our benefit. As I say, I take that point to heart.
My hon. Friend asked me what would be the public contribution, as opposed to the private sector contribution, to the demonstration projects. I think that that is a good point for us to pause and consider, because we have established the regulatory regime and people can deliver carbon capture and storage on power stations in this country today, if they want to. But nobody wants to take the risk, in terms of spending only their own money on such projects.
Without doubt, the cost of each individual project would be enormous; it would cost billions of pounds to make a project a success. So we are talking about sharing the risk. In the first competition, we were directly proposing the use of taxpayers’ money, but now we are up to the level of the four demonstration projects we are talking about a levy on everybody’s electricity bill, to make a contribution from the public sector to the private sector, in order to make a success of those four demonstration projects. Of course, when we agree about who has got the demonstration projects and therefore who will enjoy the benefits of this money, I would want to ensure that the contracts are sufficient to guarantee that, if there are any rewards to be had at the other end of the process, the taxpayer is involved in enjoying those benefits, just as the private sector will be.
My hon. Friend also wanted me to concentrate on the underground gasification of coal. As he pointed out, that was a subject covered in my discussion at the Durham Energy Institute last week. Last year, when I visited the coal authority at Mansfield, I had the same discussion with the people there, because they will give the licences for the underground coal gasification projects. I certainly urge them to be flexible and supportive of a possible new technology that would advantageous. That is something I will continue to pursue, as he asks.
My hon. Friend also asked me a specific question about the need for a strategic environmental assessment for underground coal gasification. I am told that the discussions between officials, to which he referred, have led to the conclusion that there is no need for a strategic environmental assessment for an individual project. Perhaps that is good news for him. There is certainly no obstacle in relation to that.
The hon. Member for North Southwark and Bermondsey asked about the latest environmental transformation fund call for bids. There is a news release about the results of that dated 7 January, and he is welcome to have a look at my copy of that when we have finished the debate. He also asked me about storage capacity. I hope that the answer I gave to my hon. Friend the Member for Southampton, Test deals with that point.
The hon. Gentleman asked if the ETS is insufficient to drive a reasonable price for carbon, what more can be done. That is the point the hon. Member for Wealden (Charles Hendry) came back to at the end of his speech. That is, of course, the big question of the day. As the hon. Gentleman said: it is not just about carbon capture and storage; a reasonable carbon price drives the developments in nuclear, renewables and even in energy efficiency. That matter is therefore crucial.
I still have a little bit of life left in the explanation I gave to the Select Committee on Energy and Climate Change. We are waiting to see about Copenhagen because, as the hon. Gentleman says, the accord has led to the opening of a register for which people will put in their commitments by the end of January. We are not quite at the end of January, but I agree that there will be a need to address the issue of carbon price. However, I still say that it remains the Government’s ambition that the EU ETS will be the main lever by which that is driven. I have been asked about feed-in tariffs, tax incentives, taxation and a new form of obligation. All of those are within the Government’s contemplation to assess before they make a decision on further actions.
The hon. Members for North Southwark and Bermondsey, and for Wealden, asked about the emissions performance standard. I shall come back to that in a moment. The hon. Member for North Southwark and Bermondsey asked me about page 134 of the Committee on Climate Change report. Of course, the Government published their response to that report in January 2010. However, just to take him through the four points that he raised, the committee urged us not to judge the success or otherwise of CCS simply by carbon price, but to consider the wider context of power-sector decarbonisation, and to assess CCS on the basis of UK and international evidence. In our response, we agreed that when we undertake that report in 2018, we will move away from a narrow assessment and take into account the broader points, as the committee recommended.
The committee’s report says:
“To the extent that retrofit might be considered desirable.”
There would need to be additional support for that, and we have announced that we will provide that. The report says:
“Such a mechanism should be introduced no later than 2016.”
As the hon. Member for North Southwark and Bermondsey knows, if his party and the Conservative party agree that the Energy Bill should reach the statute book before the election, the levy can be in place by 2011. We will certainly meet that requirement from the committee.
Finally, the report states:
“The Government should make it absolutely clear now that whether or not CCS can be deemed economically viable any conventional coal plant still operating unabated beyond the early 2020s would only generate for a very limited number of hours.”
We have made that clear. It goes on:
“Such a statement should be complemented by a review (e.g. in 2020) to determine the precise level and timing of such a limit.”
I totally agree. The Government will therefore conduct a rolling review and make a report in 2018. We are not proposing an emissions performance strategy today. We will conduct our business as recommended by the independent Committee on Climate Change and give our decision in 2018. That is my answer to the hon. Gentleman and the hon. Member for Wealden on emissions performance standards.
The hon. Member for North Southwark and Bermondsey also asked me about the 2050 road map. I am happy to confirm that the work is well on its way, and that we intend to produce the road map for public consumption as soon as possible. He asked me whether that would be before the general election. I suppose that I have to answer him with the question, “When is the general election?” We intend to publish the road map in the spring.
The hon. Gentleman asked me about the number of jobs and asked when the announcements about the demonstrations would be made. I thought that that undermined the argument that he made in his point of order; he said that I should speak first so that people could listen to what I said. I said that there would be 60,000 jobs by 2030, and that we hoped to call for further bids on the demonstrations before the end of this year, so that all four will be in the mix by the end of this year, with decisions by 2011.
The hon. Gentleman asked me about making public the EU correspondence. I am not in a position to say that I will do that, but I can confirm to him, as the Minister of State, Department of Energy and Climate Change, my hon. Friend the Member for Lewisham, Deptford (Joan Ruddock) has already done, that we did reply to the European Union letter—the one that he said had been leaked to him, and which he read to the Committee. We said that we did not agree with it. We have not had a substantial response to that letter yet.
Finally, I come to the speech made by the hon. Member for Wealden. He asked whether there was a race. I thought that I said “world-leading” lots of times in my opening speech. I agree with him that we would like to be at the front of the development of carbon capture and storage. Moreover, I agree with him in the sense that there is a race against time, and we must make a success of carbon capture and storage. Nevertheless, we are co-operative, and we understand the hugely important global challenge involved. We want others to be successful, too. That is why, when the European Union and China settled on the near zero emissions programme for coal, they turned to the United Kingdom to take the lead. We are the scientific, administrative and civil service lead for that project because of our recognised expertise.
The hon. Gentleman said that Dr. Jeff Chapman thinks that China and Abu Dhabi will be the first places to produce commercial CCS. I respond by saying that Ernst and Young think that the US and the UK will be first, and I am with it on that. He says that we need to publish a road map. I refer him to the response that we have made to the first annual report of the Energy and Climate Change Committee, and show him the road map on page 27. There is a timeline there, and text that goes with it. It demonstrates that we are in command of our subject, and that we have a coherent plan and a time scale that goes with it.
I always enjoy it when the hon. Gentleman praises our work on nuclear development. I agree with him that we have an excellent plan. When our office for carbon capture and storage is up and running, we will need to do more work to produce the same kind of detailed work that he describes. I think that he will find that the strategy for industry, which we hope to publish shortly, will contain much of the detail that he has pressed me about today.
I just want to say to the hon. Gentleman that we have not made any decision about setting up a new quango with responsibility for pipelines, but we understand the strategy that is needed to drive the provision of sufficient clusters and sizes of pipes to make a success of the industry, and that will be within our work.
I want to finish by agreeing with my hon. Friend the Member for Blaydon, who said that there are exciting prospects for the world, and specifically for this country, in making a success of carbon capture and storage. It is exciting because of the jobs and the energy supplies that we can secure, because of the contribution that we can make to the global challenge of tackling climate change, and because of the exports and manufacturing opportunities that we can obtain from this development. The Government are fully committed to doing their utmost to get all those benefits for this country and for the world.
By leave of the House, may I thank colleagues who have praised the work of my Committee and, in particular, the report and its conclusions? That is much appreciated, and I will draw the comments to the attention of the Committee members and staff. I welcome nearly all the points made, many of which were very constructive. I should like to mention a couple of specifics.
First, on the race, it is true that the world has an interest in getting the technology viable. In that sense, it does not really matter who develops it first. But at a time when the appetite for addressing climate change in this country and many others is faltering a bit for various reasons, it is important to identify the economic opportunities presented by the potential solutions. It would be a tragedy if Britain, with its tremendous record of creativity, innovation, scientific expertise, and so on—and a distinguished, long history of mining—were not in the vanguard of devising the technology. That is why, although I welcome what the Minister says about the exciting opportunity, which is undoubtedly true for the reasons he gave, I very much regret that we have lost a bit of time already in the past six years. We are now much more focused on the potential. It will be of enormous potential commercial advantage to Britain—our economy will benefit—if we are one of the winners in this race, just as it will benefit the whole world.
Secondly, I should like to mention underground coal gasification. I am careful to draw attention to my entry in the Register of Members’ Financial Interests, because I may have an indirect commercial interest in this matter. The hon. Member for Blaydon (Mr. Anderson) made an important point about the way that underground coal gasification can open up the potential for using a lot more of our coal reserves than would otherwise be possible, and for achieving electricity generation at much lower emissions levels. I welcome what the Minister said, but my impression is that DECC is not as enthusiastic as he is. I hope that what he says is reflected in the work that his officials do, now and in future.
I thank hon. Members for the debate.
On reflection, I ought to make it clear that when I said that the levy will pay for retrofit, I was referring, of course, to a retrofit of the demonstration plants—a move from a share of the plant to the whole of the plant. I say that just in case there was any confusion caused by my straying into the territory of my hon. Friend the Member for Southampton, Test who wants the retrofit to be considered more widely.
I am sure that that clarification will be noted.
I am certain that we will all want to return to this subject soon and regularly in future because of its enormous potential importance for Britain economically and for the world, environmentally.
Question put and agreed to.